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Trust, Leniency and Deterrence

Author

Listed:
  • Bigoni, Maria

    (University of Bologna)

  • Fridolfsson, Sven-Olof

    (The Swedish Competition authority (Konkurrensverket), Research Institute of Industrial Economics (IFN))

  • Le Coq, Chloé

    (Stockholm School of Economics, SITE)

  • Spagnolo, Giancarlo

    (Tor Vergata University, Stockholm School of Economics, SITE, and CEPR)

Abstract

This paper presents results from a laboratory experiment studying the channels through which di erent law enforcement strategies deter cartel formation. With leniency policies o ering immunity to the rst reporting party, a high ne is the main determinant of deterrence, having a strong e ect even when the probability of exogenous detection is zero. Deterrence appears to be mainly driven by `distrust'; here, the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected ne matter more, and low nes are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels' strategic features, including corruption and nancial fraud.

Suggested Citation

  • Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloé & Spagnolo, Giancarlo, 2014. "Trust, Leniency and Deterrence," Konkurrensverket Working Paper Series in Law and Economics 2014:2, Konkurrensverket (Swedish Competition Authority).
    • Handle: RePEc:hhs:kkveco:2014_002
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    More about this item

    Keywords

    Antitrust; Betrayal; Cartels; Collusion; Distrust; Fines; Leniency; Whistleblowers;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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